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RBA Governor Philip Lowe reiterated the three central messages in the meeting minutes, in a speech titled "Trust and Prosperity". He noted:

"First, the economy is moving in the right direction and further progress is expected in lowering unemployment and having inflation consistent with the target.

Second, the probability of an increase in interest rates is higher than the probability of a decrease. If the economy continues to move along the expected path, then at some point it will be appropriate to raise interest rates. This will be in the context of an improving economy and stronger growth in household incomes.

Third, the Board does not see a strong case for a near-term change in interest rates. There is a reasonable probability that the current setting of monetary policy will be maintained for a while yet. This reflects the fact that the expected progress on our goals for unemployment and inflation is likely to be gradual. The Board's view is that it is appropriate to maintain the current setting of policy while this progress is made."

The USD weakened against a number of its counterparts yesterday, as new dovish comments by Fed officials were made. Specifically, NY Fed President Williams stated that the Fed's rate hikes will occur, but were considered in the context of a very strong economy. He also stated that the Fed is not on a preset course and could adjust its monetary policy to keep the economy strong and inflation low. The comments strengthened concerns about a possible slowdown of the rate hikes with worries rising about a possible end to USD's rally. Analysts however continue to stress the importance of the USD as a safe haven and the possibility of a comeback. The greenback seems to have weakened also due to poor housing data results yesterday and today's financial releases could be closely watched.

USD/JPY dropped yesterday as it broke the 112.72 (R1) support line (now turned to resistance). We maintain a bearish outlook for the pair as the downward trendline incepted since the 15th of November remains intact. Should the pair continue to trade in bearish market we could see it aiming if not breaking the 112.15 (S1) support line. If on the other hand the bulls take over we could see the pair breaking the prementioned downward trendline, the 112.72 (R1) resistance line and aim for the 113.25 (R2) resistance level.

EUR strengthens despite Italy-Brussels standoff

The EUR continued to strengthen against the USD yesterday despite the standoff between the Italy and Brussels. Analysts seem to be concerned about a possible economic slowdown in the Eurozone and especially Germany and France. Expectations currently are however for the EUR to strengthen, albeit the market may monitor closely the preliminary release of the PMI's on Friday for further clues. We could see some volatility rise for the common currency as it strengthens during the day.

EUR/USD rose yesterday breaking the 1.1430 (S1) resistance line (now turned to support). We could see the pair trading in a bullish market today as the upward trendline incepted since the 15th of November, seems to be still guiding the pair's direction. Please be advised that the RSI indicator remains near the reading of 70 in the 4 hour chart implying a rather overcrowded long position for the pair. Should the pair find fresh buying orders along its path we could see the pair breaking the 1.1490 (R1) resistance level and aim for the 1.1550 (R2) resistance hurdle. Should it, on the other hand come under selling interest we could see it breaking the prementioned upward trendline, the 1.1430 (S1) support line and aim for the 1.1385 (S2) support zone.

In today's other economic highlights:

In today's European session we get Germany's PPI growth rate for October and in the American session from the US we get the numbers of building permits and housing starts for October. Also late in the American session the API weekly crude oil figure is due out. As for speakers RBA's Governor Philip Lowe speaks, while in the UK the Inflation Report Hearings will be held, with BoE's Governor Mark Carney speaking. Please be advised that in the crypto market Bitcoin has dropped even further marking new lows and is testing the 4500 support level, while ripple remained rather stable. Gold also moved in a sideways manner yesterday and should you be interested in more fundamentals and technical analysis about the bullion, please refer to our gold weekly outlook later today.

USD/JPY H4

Support: 112.15 (S1), 111.60 (S2), 111.10 (S3)

Resistance: 112.72 (R1), 113.25 (R2), 113.95 (R3)

EUR/USD H4

Support: 1.1385 (S1), 1.1345 (S2), 1.1305 (S3)

Resistance: 1.1490 (R1), 1.1550 (R2), 1.1610 (R3)

XAUUSD (1222.26): Gold was trading flat on Monday as price action closed with a near doji pattern. This potentially indicates exhaustion to the rally seen last week. The 4-hour Stochastics oscillator is also pointing to a correction. This comes as price struggles near the resistance area of 1224 - 1223 region. A correction to the downside could push gold prices lower toward the initial support level of 1213.50. A break down below this level could further push gold toward the previously established resistance level of 1204.10 which could be tested for support.

GBPUSD (1.2855): The GBPUSD is seen settling into a range as price manages to bounce off the support area of 1.2808. However, we expect the bias to remain to remain to the downside. The lower support at 1.2683 remains untested which could form the downside target if the sentiment further deteriorates. To the upside, the resistance area of 1.3086 remains as the upper range.

EURUSD (1.1447): The EURUSD currency pair continued to extend gains on Monday. However, price action is seen trading within the resistance level of 1.1435 - 1.1463. Failure to break out from this resistance level could potentially push the common currency lower. We expect the declines to stall near the 20-period EMA on the 4-hour time frame which could act as dynamic support. Overall, the EURUSD currency pair is likely to trade flat below the resistance level.

The U.S. Dollar extended declines on Monday. Economic data on the day was sparse. The Eurogroup meetings kicked off with focus turning to the Brexit deal. The EU's negotiator for Brexit, Michel Barnier said that the EU ministers were in support of the draft accord. However, uncertainty remains with PM May and her cabinet. The pound sterling was seen trading subdued due to this uncertainty.

The NY trading session was also relatively quiet with no significant events being released. The FOMC member, Williams was speaking yesterday. His comments were broadly positive of the U.S. economy and supported the Fed's view for rate hikes. A contrary comment compared to the views from the Fed vice chairman, Clarida on Friday.

Earlier today the RBA released the monetary policy meeting minutes. The market reaction was muted. The RBA Governor, Lowe is scheduled to speak later this morning.

The European trading session is relatively quiet with no major releases in store. The NY trading session will see the release of the building permits and housing starts data. Building permits are forecast to rise by 1.26 million while housing starts are expected to increase by 1.23 million.

The recent slowdown in the housing market, however, exposes the risk of a weaker than expected print.

EURUSD looks as it has ended its complex decline, down from September highs as we see all three waves W,X,Y unfolded. Also price made a recovery at the 1.122 level, indicating that wave Y found a low, and that a minimum three-wave reversal to the upside is now in play. In such case, we would expect to see price reach 1.15 level in upcoming sessions, from where a new, temporary pullback may follow. This pullback can be wave 2, which can later look for support and a bounce near the 1.1333 area.

EURUSD, 4h

The British pound is starting to consolidate around the 1.2850 level against the US dollar, as traders await the latest news surrounding a potential leadership challenge to UK PM Theresa May. The next technical breakout will likely come if we see the 1.2792 to 1.2883 trading range clearly broken. The MACD indicator on the four-hour time frame continues to move away from extremely oversold trading conditions.

The GBPUSD pair is only bearish while trading below the 1.2792 level, key technical support is found at the 1.2732 and 1.2695 levels.

If the GBPUSD pair trades above the 1.2883 level, key resistance is found at the 1.2930 and 1.3000 levels.

The US dollar is now trading below the 112.54 support level against the Japanese yen currency as global equity markets come under heavy selling pressure. The USDJPY pair is heavily bearish while trading below the 112.54 level and may test the 112.00 support level. Buyers now need to move price above the 112.79 level to negate intraday selling pressures on the USDJPY pair.

The USDJPY pair is strongly bearish while trading below the 112.54 level, key technical support is found at the 112.39 and 111.92 levels.

If the USDJPY pair moves back above the 112.54 level, buyers may test the 112.79 and 113.00 resistance levels.

The price of Bitcoin dropped sharply, marking the eighth day of straight declines. Indeed, the market capitalization of all currencies tracked by CoinMarketCap declined to $160 billion. This was lower than last week’s $220 billion. It is also significantly lower than the peak market valuation of more than $800 billion early this year. For the first time in 2018, the price of Bitcoin declined below $5000.

The decline in the price of cryptocurrencies started last week. This was after the hard fork of Bitcoin Cash, which happened on Thursday. A hard fork is a situation where a new currency is created from another cryptocurrency. A good example of this happened in 2017 when Bitcoin Cash was created from Bitcoin. This time, a hard fork happened regarding Bitcoin Cash after developers and miners disagreed on the future of the currency.

Forking presents a major threat to the cryptocurrency industry because of the dilutive effects that accompany it. In other words, no one will want to own a currency that is likely to be broken down in the future.

News of the hard fork came after the SEC asked Paragon Coin and CarrierEQ to return money to investors. The two companies raised money in 2017 through token sales but failed to register their ICOs as securities. There is a fear that other companies that have raised funds through ICOs will be forced to do the same.

The BTC/USD pair is trading at 4760, which is higher than the intraday low of 4665. As expected, the price is below the major moving averages as shown below. The RSI has fallen to the current 10, and the MACD too has fallen sharply. The decline in these indicators show that the downward momentum could continue.